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typicalvalue

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    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Any view on this? 

    https://careers.freddiemac.com/us/en/job/JR2254
     

    "Experience drafting disclosure for periodic reports (Form 10-Ks, Form 10-Qs, and Form 8-Ks) and beneficial ownership reports filed with the SEC as well as disclosure documents for offerings of equity securities offerings."

     

    "Knowledge of listing requirements for national securities exchanges, such as NASDAQ or NYSE." 

     

     

     

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    3 hours ago, investorG said:

    The current market cap of Fannie Mae's total jr preferred debt is around $1.5bn or about 5 weeks of after tax company profits.  Lots of ways to win from here.

     

    Agree. These are pricing as post NWS announcement yet:

     

    -GSEs still retaining capital and no profit sweep to TSY.

    -Financial advisors hired (who knows if they influence on pushing utility model recap)

    -Despite SCOTUS loss, Lamberth case and COFC look pretty good and the SCOTUS sentence made pretty clear that this is a takings case. Many shots on goal are left.

    -For me, Calabria being fired is a positive, it's nonsensical to have someone in front of the FHFA that does not fit with new admin objectives. I know that the next one could be Zandi (which is worse), but what if Wachter or Calhoun are hired? Market pessimism would shift fast.

    -Warrants due to expire in 2028, I don't think that this money will be left on the table.

    -TINA. GSEs are not going anywhere.

     

    I know that there is a lot of pessimism post-SCOTUS, and it was a disgrace, but this is not over.  Trading at 6 cnts on the dollar any positive news should take us close to 15-20 cents at least. 

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted · Edited by typicalvalue

    23 minutes ago, TwoCitiesCapital said:

    Started off as a 10-15% position for me. Has receded over the years as my opportunistic adds have not kept up with my overall portfolio growth in other positions. 

    Quite honestly, the brain damage for me would have been worse if it had been larger. It's been frustrating watching this languish and do nothing for ~10-years.

    Obviously I'll regret not having more of it IF we get the outcome we want, but I have to ask myself at what cost? I would feel way worse if I had 30% of my portfolio in this for the last 10-years instead of 10-15%. And while resolution seems around the corner and I did add a hair recently, it's ALWAYS seemed like resolution was around the corner for the last 10-years and we've been wrong the whole way so far. What matters is the outcome, but you have to survive the journey too!

    Understand the frustation, started the journey on dec 2019, I've been holding for less than 2 years so not as burnt as many of you that've been holding for 10 years+ in an endless bull market. IRR on this investment has been awful and with so many headaches on the journey. My base case is that in 8 year timeframe if we reach par/exchange I get market beating returns on my portfolio (+15% IRR). Could be very well wrong and end this will continue to be an endless purgatory, but paying 20 cents on the dollar does not seem demanding. Also SCOTUS could be the catalyst we are waiting to force restructuring.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted · Edited by typicalvalue

    On 6/3/2021 at 11:54 AM, sholland said:

    While I would never encourage anyone to make this a 90% position, I wouldn’t call it insane if someone has a high risk tolerance.  If SCOTUS agrees with 9 of the 16 5th circuit judges that the NWS is an ultra vires action then the stock goes up bigly this month.  If SCOTUS rules that the NWS is within FHFA’s statutory authority, then the plantiffs will be asking for liquidation preferences + interest @ around 9% per annum in the other court cases.  Only Receivership can take away the preferred shareholders’ liquidation preferences.  Receivership is extremely unlikely because Receivership will cause nearly $6T to be added to the national debt.

    Thats my rationale. There is only a low possibility that kills me (recievership).  This a perpetual option with strike at par when restructuring kicks in and many ways to win through judicial action if admin is not keen to recap the GSES. Willing to handle vol. Know many investors involved that are betting big, not just me (other than Glen Bradford ofc). Having said that huge concentration is risky.

    Also think that the amount of brain damage and work that this trade requires is not worthy if you don't make this at least 20% of your portfolio. 

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    On 5/29/2021 at 11:18 PM, sholland said:

    This message board has been unusually quiet lately. Am I the only one trembling with greed with the prospect of SCOTUS agreeing with the 9 of the 16 5th Circuit judges that the NWS was an ultra vires action?

     

    I noticed that the 5th Circuit has 10 judges appointed by Reagan, Bush, or Trump and 6 judges appointed by Clinton or Obama.

     

    9 of the 10 consecutive judges agreed that the NWS was an ultra vires action. 

    All 6 six of the liberal judges disagreed.

     

    Doesn’t this mean that we can expect SCOTUS to rule 6-3 or 5-4 along party lines that the NWS was ultra vires?

    Added a bit on post Jan dip, this one represent 90% of my portfolio, so have few room to add more. Agree on your arguments, thats my base case right now. This month we will se how this ends.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    Im looking to move some stuff to Interactive Brokers. I called and they said that the preferred are not listed as a ticker/security that they trade or have access to. Does anyone hold an account at IBKR and have the preferred with them? They have some pretty weird OTC stock rules it seems.

     

    TIA.

     

    The CS folk who informed you is wrong. Have all my funds in IB and you have access to all series of jrs FNMA/FMCC, so you shouldn't have any problem. You have to accept some trading permissions to buy OTC, and then you can trade it.

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    FHFA is directing Fannie Mae and Freddie Mac to contribute a record high $1.09 billion to the national Housing Trust Fund & Capital Magnet Fund, more than *double* the amount the GSEs contributed last year. The $ is distributed through Treasury & HUD to further affordable housing

     

    Still stealing money from the GSEs, the robbery has not ended...

     

    I didnt see this TV, can you provide link?

     

    https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Authorizes-More-than-$1-Billion-for-Affordable-Housing-Funds.aspx

    FNMA and FMCC preferreds. In search of the elusive 10 bagger.

    in General Discussion

    Posted

    We haven't heard much from any of the major institutional players since the amendment, but Fairholme's annual report is out (http://www.fairholmefundsinc.com/Reports/Funds2020Annual.pdf). But keep in mind that there are 3 Fairholme funds and sometimes Berkowitz will write something a little different for each one even in regards to the same investment. So below I consolidated his relevant comments on F&F.

     

    Fannie Mae and Freddie Mac's businesses are booming while in conservatorships. The U.S. Treasury has finally agreed to allow them to retain earnings for capital safety and soundness. Treasury still has not agreed that $191 billion of "loans and fees" have been repaid even after receiving over $300 billion of reimbursements and controlling 80% stakes. I expect The Supreme Court will remedy the rights of two highly successful private enterprises and further their exit from federal control. Until then, preferred shareholders remain in a volatile purgatory. A resumption of preferred stock dividends should benefit the Fund's current dividend of 2.0%.

     

    That last line sure is interesting. Does he really expect dividends to be turned back on, as opposed to an exchange of JPS into common?

     

    We are at 20% of par with Fairholme still digging in. If Supreme Court ruling is adverse and Fairholme decides to sell, we end up in much more "volatile purgatory".

     

    Since it is not a class action suit and not the only suit, there is little hope of settlement at this beyond late stage imho from Treasury standpoint. Obviously I'm not a lawyer but as a layperson what I am perceiving is that the NWS "nationalization" was obvious to the Court without any earnings/dividends going to company or shareholders in/after the third amendment, but how will they rule if they feel it was unlawful but not exactly meeting the legal criteria for the claim presented which is not a "takings" case and not even considered ripe anyway? Is 'unscrambling the egg" of NWS part of the Court's job in handling this case? Maybe not, but looking away in writing the verdict when private rights are expropriated doesn't seem the right precedent to set either.

     

    What I'm hoping for is that even if they don't reverse NWS to the original contract terms, which I seriously doubt they will, they rule in such a way as to ensure legal rights of private shareholders are protected going forward. This may be enough for market participants to close the gap between price and value.  Feeling deeply uncomfortable using hope as an investment strategy here with hard earned money, but holding on.

     

    +1 right now hope is part of this investment I guess. What its beyond my understanding is how come Mark Calabria has not said a word since the PSPA was out, ~20 days and counting. Would love to see what are his views on this, even if pessimistic.

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